Christian Echoes National Ministry, Inc. v. United States, 72-1308.

• Decision Date: 17 January 1973
• Docket Number: No. 72-1308.,72-1308.
• Citation: 470 F.2d 849
• Parties: CHRISTIAN ECHOES NATIONAL MINISTRY, INC., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

470 F.2d 849 (1972)

CHRISTIAN ECHOES NATIONAL MINISTRY, INC., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 72-1308.

United States Court of Appeals, Tenth Circuit.

December 18, 1972.

Rehearing Denied January 17, 1973.

COPYRIGHT MATERIAL OMITTED

LeRoy Blackstock, Tulsa, Okl. (Craig Blackstock and J. C. Joyce, Tulsa, Okl., on the brief), for appellee.

Stephen Schwarz, Tax Division, Department of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Tulsa, Okl., Meyer Rothwacks and Grant W. Wiprud, Tax Division, Department of Justice, Washington, D. C., Nathan G. Graham, U. S. Atty., Robert P. Santee, Asst. U. S. Atty., Washington, D. C., of counsel, on the brief), for appellant.

Before PHILLIPS, BARRETT and DOYLE, Circuit Judges.

BARRETT, Circuit Judge.

Christian Echoes sued for refund of Federal Insurance Contribution Act (FICA) taxes for 1961 and 1963 through 1968 amounting to $103,493.08 plus statutory interest. On June 24, 1971 the District Court held that the taxpayer qualified for tax exemption under 26 U.S.C.A. Section 501(c)(3). The Government appealed to the United States Supreme Court which vacated the judgment and remanded for entry of a new decree. United States v. Christian Echoes National Ministry, Inc., 404 U.S. 561, 92 S.Ct. 663, 30 L.Ed.2d 716 (1972). The District Court entered the same decision on February 24, 1972. The Government takes this appeal therefrom.

Christian Echoes is a nonprofit religious corporation organized in 1951 under the laws of Oklahoma by Dr. Billy James Hargis, its president, chief spokesman and an ordained minister. The Articles of Incorporation state in part that the corporation is founded "to establish and maintain weekly religious, radio and television broadcasts, to establish and maintain a national religious magazine and other religious publications, to establish and maintain religious educational institutions, . . ." Article III of the Articles of Faith in the corporate by-laws reads as follows:

"We believe in God, Supreme and Eternal, and in Jesus Christ as His Son, perfect Deity, and in the Holy Comforter and Challenger of this age, The Holy Ghost, and in the Bible as the inspired Word of God.

We believe that the solution of the World\'s problems, economic, political and spiritual, is found by the application of Christian Teachings in the lives of men and nations rather than in political ideologies of any kind.

We believe in the Twentieth Century Reformation to combat apostate conditions with the Church.

We realize atheistic world forces seek the destruction and overthrow of all the religions of the World, including particularly that founded upon the teachings of Jesus Christ. The same forces seek also the destruction of all free governments, in which the lives and property of the people are protected by civil, moral and spiritual law.

We associate ourselves together to educate and proclaim the essential truths of Christianity, and the doctrine: Jesus Christ is the Hope of the World and America is God\'s Greatest Nation under the Living Son.

We believe in the real spiritual unity in Christ of all redeemed by His precious blood.

We believe in constitutional government, whereby religious as well as other freedoms of mankind are preserved and protected.

We believe in the fundamentals of New Testament Christianity, and we propose to promulgate the eternal truths thereof at all costs."

The activities of the organization have been addressed to that theology ever since the date of incorporation.

Christian Echoes maintains religious radio and television broadcasts, authors publications, and engages in evangelistic campaigns and meetings for the promotion of the social and spiritual welfare of the community, state and nation. Dr. Hargis has stated that its mission is a battle against Communism, socialism and political liberalism, all of which are considered arch enemies of the Christian faith. Dr. Hargis testified that Christian Echoes supports "Christian conservative statesmen . . ." without regard to party political labels. The organization publishes a monthly anti-Communist magazine, Christian Crusade, a weekly "intelligence report", Weekly Crusader, and a newspaper column, "For and Against". It also distributes pamphlets, leaflets and broadcast reprints on aspects of anti-Communist activity; it distributes tapes and records of selected broad casts; and it conducts an annual anti-Communist leadership school whose goal is to answer the question, "What can my community do to stem the forces of liberalism and thus stop the growth of socialism and communism?" In 1962 it established a Summer Anti-Communist University and formed youth groups, Torchbearer Chapters, to educate the public on the threat of Communism. In 1964 Christian Echoes encouraged adults to organize local Christian Crusade chapters. Christian Echoes appealed for contributions from the public to carry on its campaign. It earned money from the sale of its publications, tapes, films and admission fees at rallies. From 1961 through 1966 its gross receipts ranged from about $677,000 to $1,000,000 per year. It spent 52% of this income on radio, television, publications and postage.

On March 12, 1953 the Internal Revenue Service ruled that Christian Echoes qualified as a tax-exempt religious and educational organization under Section 501(c)(3) of the 1954 Code, formerly Section 101(6) of the 1939 Code. Section 501(c)(3) states as follows:

"Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office." (Emphasis ours.)

In 1962 and 1963 the National Office of the Internal Revenue Service requested that the activities and financial affairs of Christian Echoes be re-examined. The IRS agents recommended no change in its exempt status. The National Office, after reviewing and analyzing the activities of Christian Echoes, recommended that the exemption be revoked. On November 13, 1964 the District Director in Oklahoma City advised Christian Echoes in a letter of the revocation of its exemption and of its protest rights. Christian Echoes filed a formal protest on June 25, 1965 after conferences with the District Director and the National Office. The District Director notified Christian Echoes on September 22, 1966 that its exempt status was being revoked for three reasons: (1) it was not operated exclusively for charitable, educational or religious purposes; (2) it had engaged in substantial activity aimed at influencing legislation; and (3) it had directly and indirectly intervened in political campaigns on behalf of candidates for public office. Christian Echoes filed further protests without avail. It paid the taxes as assessed. Christian Echoes then filed this refund suit, claiming its right to exemption.

The District Court held that the taxpayer was entitled to tax-exempt status under Section 501(c)(3). The Court ruled that Christian Echoes qualified in that no substantial part of its activities had been devoted to attempts to influence legislation or intervene in political campaigns. The Court found that the only activity of Christian Echoes relating to an attempt to influence legislation was in support of the Becker Amendment urging support of restoration of prayers in the public schools. The Trial Court accepted Dr. Hargis's interpretation of the "attempts to influence legislation" prohibition in 501(c)(3), wherein Dr. Hargis testified on cross-examination that:

". . . it\'s my interpretation that as long as I don\'t lobby in Washington, which I never have, as long as I don\'t get behind a bill or a — post a bill which I never have, as long as I don\'t endorse a political candidate, which I never have . . . that by no stretch of the imagination could you say what I am doing is political, . . ."

It also held that all of its activities were motivated by sincere religious convictions; that the First Amendment prohibits the Government and courts from determining whether the activities are religious or political; and that the IRS had revoked Christian Echoes' exempt status without evidence to support its action and without constitutionally justifiable cause in violation of the First Amendment. It found that the taxpayer had been denied its right to due process under the Fifth Amendment because the Government had arbitrarily selected it from organizations engaged in similar activities and had violated its published administrative procedures in the steps leading to the revocation.

The Government appealed directly to the United States Supreme Court which dismissed the appeal for lack of jurisdiction, vacated the District Court's judgment and remanded for entry of a new decree. The IRS appeals from the District Court's holding in favor of Christian Echoes following remand.

The Government contends that: (1) the taxpayer failed to qualify as tax-exempt under Section 501(c)(3); (2) its interpretation and application of Section 501(c)(3) did not violate the taxpayer's rights under the First Amendment; (3) its revocation of tax-exempt status to the taxpayer under Section 501(c)(3) did not violate the taxpayer's rights of due process under the Fifth Amendment; and (4) the Commissioner did not abuse his discretion in revoking the exemption with retroactive effect.

I.

The Government contends that Christian Echoes failed to qualify as tax-exempt under Section 501(c)(3) because: (1) a sub...